USD/CAD sticks to gains on stronger USD, remains below mid-1.3400s amid bullish Oil prices

The USD/CAD pair attracts some buying near the 200-day Exponential Moving Average (EMA) on Monday and sticks to its modest intraday gains through the early part of the European session. The pair currently trades around the 1.3430-1.3435 region, up nearly 0.10% for the day, and for now, seems to have snapped a three-day losing streak to the 1.3400 mark, or a nearly three-week low touched on Friday.

The US Dollar (USD) gains some follow-through traction for the second successive day and turns out to be a key factor acting as a tailwind for the USD/CAD pair. Despite the mixed US monthly employment details, the markets area still pricing in another 25 bps lift-off by the Federal Reserve (Fed) later this month. This remains supportive of a further rise in the US Treasury bond yields and pushes the Greenback higher on the first day of a new week. That said, the prevalent risk-on mood might hold back traders from placing aggressive bullish bets around the safe-haven buck.

The markets continue to cheer the optimism over the passage of legislation to lift the government's $31.4 trillion debt ceiling to avert an unprecedented American default. Adding to this, a private-sector survey showed on Monday that China's services activity picked up in May and boosted investors' confidence, which is evident from a generally positive tone around the equity markets. This, along with an intraday rally in Crude Oil prices, which tends to underpin the commodity-linked Loonie, further contributes to capping any meaningful upside for the USD/CAD pair.

In fact, Oil prices opened with a bullish gap on Monday in reaction to an OPEC+ agreement over the weekend to extend at least 3.66 million bpd of cuts till end-2024 from end-2023. Adding to this, Saudi Arabia pledged to cut its production by about 1 million bpd in July to 9 million bpd and lends additional support to the black liquid. This, in turn, makes it prudent to wait for a strong follow-through buying around the USD/CAD pair before positioning for any further appreciating move ahead of the release of the US ISM Services PMI later during the early North American session.

Technical levels to watch